Experienced-rated policies and how they are reported on the Schedule A in the Form 5500 can be a bit of a mystery. This blog is to help provide more understanding.
What is an Experienced-Rated Contract?
- The premiums for the current experience-rated contract are based on the number and the amount of claims, the experience under the contract, for the previous policy period.
What is required for the 5500 Report for experienced-rated?
- Generally speaking, the carrier provides the following main key data points to be included on page four of the Schedule A, under the “Experience-rate contracts” section (the carrier may provide additional data).
- 9a(1): Premiums received by the carrier
- 9b(4): Claims paid (claim reserve to be applied)
- 9c(1)(H): Total charges for the insurance/the retention: such as commissions to the broker, services fees, taxes
Here is a snapshot of the section of the Schedule A that reports these various amounts.
- Carriers do not always provide data for each line. This “missing” information should not be inserted from the Plan Sponsor.
Do some carriers provide the data for experienced-rated even if the contract is not set up that way? If yes, how does Wrangle handle the 5500?
- Yes, some carriers do provide extra data. In order for the liability of the data to remain with the carrier, the data is to be reported as the carrier provides it.
- If Wrangle receives confirmation from the carrier that even though additional data points were provided and the contract is not experience-rated, Wrangle will only list the premium amount under 10a (data point for non-experienced rated) on the Schedule A.
What does the SAR relay to the Plan Participants?
- The total premium is to be listed as found under 9a(1) of the Schedule A as well as the total claims charged under 9b(4).
- Please note the DOL dictates which particular data points are to be used in the SAR from the 5500
Experienced-Rated Section Example from the SAR Template:
“Because they are so called, “experience-rated” contracts, the premium costs are affected by, among other things, the number and size of the claims. Of the total insurance premiums paid for the plan year ending DATE, the premiums paid under such “experience-rated” contracts were X [data point of Schedule A premium 9a(1)] and the total of all benefit claims paid under these contracts during the plan year was X [data point of Schedule A total from 9b(4)].”